"The Board of Directors of Chrysler Group ... has determined that it will not be practicable for Chrysler Group to launch and complete an initial public offering prior to the end of 2013," Fiat said in a statement.

The tax issue that prevented the IPO launch reportedly stemmed from a disagreement over the price of the Chrysler IPO between Fiat corporate and the United Auto Workers (UAW) union – which through its retirees' healthcare trust VEBA owns the remaining 41.5 percent of the of the company's shares, Reuters reported.

Fiat CEO Sergio Marchionne has already expressed interest in increasing his company's share of Chrysler and eventually acquiring it outright so to combine the two companies.

Advisers were considering a valuation of about $10 billion for Chrysler, people with knowledge of the matter said last week. The valuation is considered to be near the low end of the range , Bloomberg noted. A union trust had demanded the offering to resolve a pricing dispute with Fiat.

"The IPO, as it was unfolding, wasn’t a knock-out punch for either side," Erik Gordon, a professor at the University of Michigan’s Ross School of Business and Michigan Law School, told Bloomberg. "Each side was overly optimistic. It left both sides in a position where maybe it was better to keep talking."

As a result of the uncertainty, Fiat shares fell more than two percent in afternoon trade on Monday, Reuters noted.

"Nobody really believes there will be an IPO, but any delay in the IPO process means there will be a delay in the two parties striking a deal," a Milan-based analyst told Reuters. "The stock is reacting on the uncertainty."